A 'Roo in Headlights
G'day. Another little wander down below $440 for the gold price has been met by significant buying of physical metal across Asia with numerous reports surfacing of aggressive gold bullion purchases by the Chinese general population. They're running from dollars, pretty fast. Furthermore, the Kumars at Number 42 are pretty happy too. Tickets are cheap at present (people may recall that a "ticket" is a 22-24 carat gold bracelet that costs about the price of an air ticket from Heathrow to Mumbai).
Sure, tonite's Beeks reports could stuff up my expectation but as stressed these past few weeks that any excursions down into the low $430's could be very brief indeed. A little bit like yesterday's blip down to $435ish.
The trading pattern is nearly the same each day with solid, consistent bids supporting gold all day throughout Asia, quietly erasing most of the previous NY losses. The early Europe trade attempts to take gold down again and is generally rejected and we head into the NY session basically unchanged from the previous NY open. Note that the London Gold fixes, which are "physical" gold related rather than "paper gold", are pretty flat this past week. New York, the center of the paper gold universe, makes it pretty bloody obvious that it wants gold lower. The physical market just won't play along. Get used to it.
The dollar, following on whatever Beeks delivers at midnight tonite or whenever it is, may get another rally of some significance, but I contend that any rally should be looked upon with total scorn and derision. It is just another opportunity, IMO, for people to dump dollars and find something else to invest in. I go for gold, others will go for another useless IOU from some other Central Bank. I would be surprised if people don't really get after any "second chances" to dump the buck and, as such, I reckon any dollar rally will be short in duration. A short, sharp "V" should appear in the charts. It won't change the inevitable outcome, but will just let a few more rats off the sinking ship. A mate just back from Bali reckons Aussies can deal 1 to 1 for the greenback, with the locals. Hmm.
But then again, maybe the data will just slam the buck and it is 1.36 in quick succession.
I acknowledge that the "contrarian" trade at present would be to get long the buck, but the fundamentals are so crappy and the outlook so bleak, I just wouldn't hold dollars. We all KNOW that the dollar is toast, eventually, even the "officials" acknowledge such. Why would anyone hold dollars, even for a few days, given the risk. You may as well be passing a lit stick of dynamite around a circle, not unlike the kids party game where they "pass the parcel" around a circle and when the music stops, whoever holds the parcel gets to open it. The dynamite that is the dollar, is gonna blow-up whoever is left holding it. I dunno when, but I do know that it won't be me.
The issue of Central Bank gold sales sending the prices way lower is dead, IMO. There is not a central banker in the world who would dare announce that they were selling gold reserves, IMO. The Poms, under Gordon Brown, have lost a few billion bucks on their gold sales and this has not been lost on many commentators, although there should be way more people giving them curry for such a financially suicidal decision and action. Forget that they guaranteed the worst possible return for their gold by the way they conducted their sale. It was almost as if they wanted just to drive the price lower, rather than maximize their "shareholder's" return. The shareholders are the Citizens of England in this case. The Australian Reserve Bank did a little better on the execution side of the ledger, but they still sold OUR gold and got a few IOU's back from a bunch of bankrupt countries. This sucks, bigtime, and no one from the RBA will discuss it, certainly not with anyone who can ask the right questions that will cast light on the lunacy of said sale. I once got the opportunity at a lunch to ask an RBA Official whether he saw risk in the Fiat Currency system and that maybe we should get our gold back. The one word reply was "No". No further discussion, an uncomfortable silence and "the look" that I got would've killed 10 black dogs. That's reassuring, isn't it?
Anyway, if some smart little Central Bank type decides to sell in the market any good sized parcel of physical gold, it is my contention that it would never see the light of day, let alone find its way onto the global gold market. If a CB said they'd sell gold, I reckon maybe Japan or China, but certainly Russia would just say: "Thanks, my U.S. dollars are on their way, as are the armoured trucks to take the stuff out of the Bank of England and off to RAF Fairford. Military transporters bound for Switzerland and here to Moscow are on standby. Thanks for the opportunity to water down my dollar holdings and literally become Alchemists. Turning paper into gold must surely qualify as Alchemy. No?"
Note that Russian gold reserves rose by $44 billion so far this year and their buying was at double last year's rate. What does Ivan know?
Silver is just treading water around the 200DMA and that's just fine with me. Building the base for the next hard run up, I think.
What's the deal with all these bloody gold producers trying to take each other over? Wheaton River (WHT), Goldcorp (GG), Iamgold (IAG), Glamis Gold (GLG) and whoever else. Yesterday it was Glamis Gold's turn to enter these silly little pi$$ing contests. Fair dinkum. You'd think that being a nice mid-sized gold producer, rolling along and doing nicely for their shareholders would be enough for these guys. Why not just be happy to just get on with doing everything perfectly, thereby exploiting their assets to the fullest potential? I'd rather see a great mid-sized producer than an ordinary larger one. Size doesn't matter. Performance does.
I have mentioned many times in the last 5 years that Goldcorp, along with one or two others, should be the cornerstone of anyone's gold portfolio, in my opinion and not advice. Goldcorp is currently just about bombproof. What will happen now, I dunno, but why screw with something that is near enough to perfect? I want to see the figures before I comment any further but I will say that the prospective new management of a joint company will be crucial in my deliberations.
I watched the Bloomie TV today and saw GWB talking about the Social Security funding issues, amongst other things. Man, talk about a 'roo caught in the headlights! This problem is so freaking huge, I swear I've never seen him look so terrified on camera. He knows! I heard someone suggest the bond market may be a solution to the problem. Hasn't anyone in that Government worked out that the you can't borrow your way to prosperity, especially with the massive borrowings already in existence, that can't be paid back. I don't think Japan and China are gonna be too keen to bail out this situation. They're already bleeding from every orifice just looking after the current liabilities of the USA and they can't be expected to play the "moronic vendor financier" for much longer. Well certainly not at 4% yields for their 10 year debt!
Bond yields must surely head higher so as to outweigh the risks. At present, I reckon a 5% yield isn't enough compensation by a long way. Can we see double-digit interest rates in bonds in the next handful of years? I don't rule anything out these days, and maybe some way out of the money options may be a nice leverage play. Either way, yields will be way different to what they are now in a few years. Maybe they get "The Vapours" and head to zero? Not from where I sit, as they're two entirely different beasts and unfortunately, I don't have the time to go into why, at this stage.
What did you all reckon about that Coolmore newsletter yesterday? Thoroughbreds really are a global deal nowadays. The description of the horse in the first paragraph shows how "international" they are. The mare that I am trying to sell has similarly internationally recognizable bloodlines and is therefore appealing to buyers in many countries. Hence, the price is in gold.
Lisa and I are heading out to the first day of the Summer Carnival of Racing, at Royal Randwick tomorrow. It's gonna be a hot one, temperature wise, so it should be a great workout for the optic nerves as the fillies get all dressed up and we all know that the hotter the weather, the shorter the .... Odds.
Expected ranges - give or take a CPI number and remember there's no physical market past noon NY and so it's susceptible to a big bad bear raid, as in the past.
Gold 432-455 (wide for cpi)
Gold 438-446 on the tight side
Enjoy the weekend .... Jets by 16., yep, by 16...
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